We recently started a series called “Penny Stock of the Day”. These ideas are geared towards traders with an extremely high risk appetite.
Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.
Penny Stock of the Day: Advantage Solutions Inc. (NASDAQ: ADV)
Today’s penny stock pick is the leading provider of outsourced sales and marketing solutions, Advantage Solutions Inc. (NASDAQ: ADV).
Advantage Solutions Inc. operates in two segments, Sales and Marketing. The Sales segment offers brand-centric services, such as headquarter relationship management; analytics, insights, and intelligence; administration; and brand-centric merchandising services.
This segment also provides retailer-centric services comprising retailer-centric merchandising, in-store media, and digital commerce. The Marketing segment offers brand-centric services, including shopper and consumer marketing, and brand experiential services; and retailer-centric services, such as retail experiential, private label, digital marketing, and digital media and advertising.
Website: https://advantagesolutions.net
Latest 10-k report: https://ir.advantagesolutions.net/sec-filings/sec-filing/10-k/0000950170-23-005522
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for ADV in the last 3 months, the stock has an average price target of $3.00, which is about 12% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s CEO & Director, David Peacock, recently paid US$2.65 per share to buy US$133k worth of the stock.
- Corporate Insiders placed Informative Buys of Shares Worth $504.2K in the Last 3 Months.
Insiders | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Ascending Triangle Pattern: The daily chart shows that the stock is currently forming an ascending triangle pattern, which is marked as purple color lines. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
ADV – Daily Chart
#2 Price above MAs: The stock is currently above its 50-day SMA as well as 200-day SMA, indicating that the bulls have currently gained control.
#3 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#5 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#6 Channel Breakout: The weekly chart shows that the stock is currently moving higher after breaking out of a downtrend channel. This channel is shown as pink color lines. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining firm control.
ADV – Weekly Chart
#7 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30 in the weekly chart as well. This indicates bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ADV is above the price of $2.90.
Target Prices: Our first target is $3.80. If it closes above that level, the second target price is $4.50.
Stop Loss: To limit risk, place a stop loss at $2.40. Note that the stop loss is on a closing basis.
Our target potential upside is 31% to 55%.
For a risk of $0.50, our first target reward is $0.90, and the second target reward is $1.60. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses. ADV’s net loss was $1,377.3 million for the year ended December 31, 2022.
ADV – Consolidated Statements of Operations
- The company has a history of name changes. It was originally known as Conyers Park II Acquisition Corp. Conyers Park changed its name to Advantage Solutions Inc. in March 2016.
- ADV has been involved in various litigation, including purported class or representative actions with respect to matters arising under the U.S. Fair Labor Standards Act, California Labor Code, and Private Attorneys General Act. In August 2019, as a result of the Take 5 Matter, the company had to provide a written indemnification claim notice to the sellers of Take 5, or the Take 5 Sellers, seeking monetary damages based on allegations of breach of the asset purchase agreement as well as fraud.
- Despite being a loss-making company, the executives are being paid significant compensation.
ADV – Executive Compensation
- Hedge Funds Decreased Holdings by 9.3K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!
Happy Trading!
Trades of the Day Research Team
READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.
Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.
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